Inflation is starting to impact the most financially-resilient age groups

As the UK population contemplates the implications of the cost of living crisis, the latest ONS data on households’ financial resilience provides useful insights into who is being most affected. One of the standard questions asked in the Opinions and Lifestyle Survey is a particularly relevant benchmark, as it reflects both what is happening to people’s cash flows (income and expenditures) as well as wealth (e.g., savings). People are asked:

Could your household afford to pay an unexpected, but necessary, expense of £850?

Two years ago, in April 2020, around a third of respondents (33%) said “no”. In the latest statistics, from April 2022, the figure was in fact slightly lower, at 26%. (There is an error margin around these estimates. In the latest numbers, ONS estimate that there is a 95% probability that the “actual” figure in the broader population — i.e., not just those surveyed— is somewhere between 24% and 29%. Of course, we also need to keep in mind that these are people’s self-reported views.)

Nevertheless, the number of people reporting that they would likely have a problem finding an extra £850 if needed has been going up somewhat since November. As the chart shows, the trend has been particularly noticeable among those aged 50 to 69 and those aged 70 and over (the two right-hand panels). These older groups of people have previously reported a higher-than-average ability to meet an unexpected expense, but now that resilience is being eroded — no doubt partly due to inflation in energy and food costs.

The broader patterns are, however, important, too. Even though the recent trend is the most negative among older people, it is the group aged 30 to 49 that remained the least resilient in April 2022 (2nd panel from the left). A significantly larger proportion of people in this age bracket have dependent children; consistent with earlier findings that it is parents whose finances have been squeezed the most since the start of the pandemic.

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Tera Allas

I help complex organisations make the right strategic decisions through innovative, insightful and incisive analysis and recommendations.